MANILA, August 27, 2004 (STAR) DEMAND AND SUPPLY By Boo Chanco - President Arroyo was right to admit the reality of a fiscal crisis. She should have done this during her inaugural or the State of the Nation Address, not in front of a gathering of policemen and only because a group of economists issued a scary warning. She knew what the UP economists wrote and could have taken the initiative.

But now that she has admitted it, she must follow through with a credible program to address the problem. The legislative measures she wants may take a while to get, but there are a lot of things she could do with existing laws and powers at her disposal.

While her economic managers were correct to clarify that the use of the word "crisis" was more intended to deliver a wake up call, I am not sure that made much of a difference among credit rating agencies or investors who are following local events closely. The credit rating agencies, the World Bank, IMF and other agencies whose businesses require them to know what is going on with our economy, are even likely to take the announcement as a positive sign that finally, the country is over its denial stage.

Of course the economic advisers of the president as well as Bangko Sentral officials are also correct to say that we do not have a crisis in the sense that we are unable to pay our obligations. Not yet, anyway. We are still a couple of years away from the Argentina situation. But we are getting there unless we do something now.

The sad part is, our politicians think Ate Glo was playing games with them with her dire admission. Based on what I have seen on television and read in the newspapers and press releases sent to me by politicians, it seems that the wake up call didnít work as well as it should have. Maybe they are just afraid of the draconian measures Ate Glo wants to implement that would affect their perks and pork barrel.

That is precisely the kind of attitude that would make us an Argentina faster than even the more pessimistic economists predict. They even want a congressional investigation where everyone can grandstand. All they need is a half day briefing by the UP School of Economics professors.

I was watching the discussion in the ANC show of Pia Hontiveros of congressmen about the impact of Ate Gloís declaration on the IRA or internal revenue allocations of local governments. The congressmen were mostly being legalistic about the question. While it is true that the Constitution and the Supreme Court give MalacaŮang little elbowroom on the matter of the IRA, I feel the whole matter of distribution should be reconsidered.

For instance, the rich barangays in Makati have money running out of their ears from their IRA. No wonder some of the villages spend money on atrocious entrance gates and such other ostentatious but pretty useless expenditure at this time of crisis. Maybe, the rich barangays can adopt poor barangays in the countryside and share their IRAs to help them.

On the whole, until I see the day when our legislators start offering cuts in their perks and pork to recognize the existence of a fiscal crisis in our midst, I will have no confidence that we are finally going to lick this problem. Credit rating agencies and investors on the other hand, will look for concrete measures from all branches of government. The revenue measures are important in that sense. Congress must not only pass new tax measures but make current ones equitable so that citizens would want to cooperate. Lawyers should be made to pay VAT, for instance, before they raise the VAT rate to 12 percent.

Leadership by example is the key to addressing this crisis successfully. Let us see that happen now.

Readers suggest:

Reader A.S. Reyes wrote to suggest some measures to address the crisis.

Can I just make humble suggestions for the part of the government in this belt-tightening mode:

1) government officials and offices are not allowed to purchase any luxury vehicles such as Troopers, Accords, Expeditions and other high end vehiclesÖ only locally produced units such as the ever dependable FX type vehicles should be allowed.

2) all uniforms for the AFP, PNP and other offices must be manufactured by local manufacturers no imports except for the fabrics which should be given a tax exemption. This will generate employment for our garment manufacturers.

3) no govít official must travel on business class. All tickets or travel arrangements must only be economy travel and only using our local air and sea transportation companies.

4) all govít offices must learn to save on electricity, fuel and other expenses from their offices.

5) no lavish "handaan" which is usually charged to the govít offices. The celebrations for birthdays and other special occasions must be lessened if not avoided.

6) 15 / 30 employees must totally be eliminatedÖ also ghost employees and ghost projects must be stopped.

The bottomline I guess is we Filipinos must observe " leadership by example. " If our top officials show us that they can sacrifice their lifestyles for the sake of the country why canít we do the same. Our belts have been so tight for so long and our sacrifices have been enough to give us a monument in Luneta. Why donít You (government officials) start and make the move. Mabuhay ang Pilipinas. We always read your column. More power to you.

Meanwhile from Vancouver, Canada, overseas Pinoy Bombet Arangote e-mailed his reaction.

Read your article about our ballooning debt. Nakakatakot talaga. I guess everybody should do their share to make sure that the Philippines doesnít sink. As a start, maybe Congressmen and Senators should cut their "pork barrels" in half. Then slash the salaries of executives of GOCCs. Start taxing the sin products (tobacco, liquor, karaoke bars, etc.) Tax as well Churches, and religious organizations.

Encourage local businesses to use locally-made products. Implement tariffs to protect those industries that are critical to the survival of the Philippine economy. Pinoys should look first to their interest before the interest of others. Here in Canada, industries that are critical to their domestic economy are protected by tariff and non-tariff barriers. Cut the staff level of the government or make them contractuals.

OFWs should strive to increase their remittances. Lastly, punish grafters. Shoot them in public so that the people wouldnít think that crime pays in the Philippines. Taxing taxes From Dr. Ernie, this taxing thought.


Taxation with representation is not so great either.

Boo Chancoís e-mail address is

Reported by: Sol Jose Vanzi

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